World Bank Revises India’s Growth Projection for FY2025-26
The World Bank has adjusted its forecast for India’s economic growth, now projecting a rate of 6.3% for the fiscal year 2025-26. This figure marks a slight decline from the 6.7% growth rate predicted earlier this year in January. The revision is attributed primarily to weaker export performance and subdued investment activity.
India Remains Fastest Growing Major Economy Despite Downgrade
Despite the downward revision, India continues to be the fastest growing economy among the world’s largest nations. The latest update, featured in the World Bank’s June 2025 Global Economic Prospects report, underscores the challenges facing India’s export sector, which has softened due to reduced demand from key trading partners and increasing global trade barriers.
Investment growth also appears to be slowing, reflecting heightened global policy uncertainty that is influencing business sentiment and capital deployment.
Short-Term Setback, but Recovery Expected
Looking beyond FY2026, the World Bank anticipates a rebound in India’s economic momentum. Growth is forecasted to accelerate to an average of 6.6% annually over the subsequent two fiscal years (FY27 and FY28). This upswing is expected to be driven by robust activity in the services sector, which may help revive export growth.
The report notes that India’s economic activity has moderated recently, largely due to a slowdown in industrial production. Still, this has been balanced by steady service sector performance and recovery in agricultural output, which soften the overall impact.
Global Context: Slowed Growth Amid Heightened Uncertainty
The World Bank’s report also highlights a broader global slowdown. Increased trade tensions and pervasive policy uncertainty are weighing on worldwide economic momentum. The forecast for global growth in 2025 has been trimmed to 2.3%, the lowest rate outside of recessions since 2008.
World Bank’s Chief Economist emphasized that this represents a significant reduction — cutting nearly half a percentage point from earlier projections. Moreover, the long-term outlook is cautious, with global GDP growth expected to average only 2.5% per year during the 2020s, the slowest decade since the 1960s.
Implications for India and Beyond
- Exports: Weaker demand and trade barriers have dampened export growth prospects.
- Investment: Global policy uncertainty is curbing the pace of investment expansion.
- Sector Performance: Industrial slowdown offsets resilience in services and agriculture.
- Future Outlook: Growth is expected to pick up beyond FY26, driven by services and a revival in exports.
In summary, while India’s economic growth forecast has been lowered this fiscal year due to external and domestic headwinds, it still stands out as the fastest-growing among major economies. The anticipation of a rebound in the coming years offers a cautiously optimistic horizon amid a challenging global economic landscape.
